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Tuesday, April 24, 2012

Race to the Elysee: How the French voted and what this means for Europe and the UK

Francois Hollande’s victory in the first round French presidential election was overshadowed by two historic events. Front National candidate Marine Le Pen gained 17.9% of the vote, the party’s highest ever share, while Nicolas Sarkozy became the first incumbent President in 50 years to lose the first round vote. Neither result should have come as much of a surprise. Surveys have consistently ranked Le Pen in third position since January, and her poll ratings have reached the dizzy heights of 21% several times since. Meanwhile, Sarkozy performed better than polls predicted. The last IPSOS survey published Friday gave Hollande a 3.5% lead in the first round, which eventually narrowed to just over 1% on Sunday.

Le Pen’s share of the vote is shocking when considered in conjunction with the support expressed for other minority or extremist candidates. In total, just under a third of voters picked one of the six candidates who proposed either an exit from the euro (Le Pen), France’s withdrawal from the Lisbon treaty (Jean-Luc Melenchon) or the introduction of a 100% tax rate on incomes above €360 500 (Nathalie Arthaud, Melenchon). These extremist, protectionist or hard-left manifestos offered a clear rejection of current European German-inspired programmes of austerity. The pressing need to reduce France’s crippling public debt was either ignored, or addressed by flippant policies such as a eurozone exit (Le Pen), a refusal to contribute to the EU budget (Le Pen), or punitive politicised taxes on the finance industry (Melenchon, Arthaud and Poutou).

This support for extremist candidates with little sense of reality does not appear to form part of a protest vote. An Ipsos exit poll reveals that 64% of Le Pen voters picked her because they believed that her policies addressed their concerns, much higher than the equivalent level for frontrunner Hollande.

Why does this matter?

Angela Merkel’s spokesman commented yesterday that Le Pen’s “high score is preoccupying” but that fears of a rise of far-right fervour would be checked by a second round contested by two mainstream candidates, both committed to balanced budgets and a strong relationship with Germany.

Yet Merkel’s good faith may be ill-founded. For Sarkozy to win the second round (he currently lags 8 percentage points behind Hollande in polls) he must be able to court the FN electorate. Yesterday, the incumbent insisted he was ready to take on the challenge, stating that “the Front National voters ought to be respected”, and stressed, “I’d like to tell them: I heard you”.

This is bad news for Merkel. Sarkozy’s 2012 flirtation with the hard right has pushed him to endorse a series of proposals which contravene the German vision for Europe and threaten the Paris-Berlin alliance. These include a Buy European Act, an insistence on renegotiation of the ECB’s role and a re-evaluation of the Schengen treaty. Merkel has agreed to introduce a mild reform to the Schengen area, but she has made clear she will not yield on any economic policies or institutions.Over the next two weeks, Sarkozy has promised to introduce further manifesto pledges, which are likely to be geared towards a far-right electorate. This is likely to jeopardise his relationship with Merkel.

If Hollande is elected, Merkel will have to work with the unknown. Hollande has expressed his commitment to several pet projects, including the introduction of a growth clause in the fiscal treaty, the creation of Eurobonds, direct ECB loans to embattled governments, and a budget which relies on unrealistic 3% French growth predictions, but it is unclear how willing he is to negotiate on the implementation of these policies. In the last month, for instance, he has wavered in his commitment to the growth clause, alternating between a largely cosmetic addendum, and a full re-write.

An Hollande victory in the second round would also have serious repercussions in the legislative elections in June. Sarkozy has vowed to permanently retire from politics if he fails to renew his mandate on May 6th. Lacking a clear heir, the UMP is unlikely to be able to reorganise itself and perform convincingly by June. This is exactly what Marine Le Pen seeks. Yesterday, she made clear that she hoped to use her result to launch herself as a major figure in French opposition politics. The FN currently lacks a seat in the Assemblee Nationale, but 2012 could prove a turning point. If so, Merkel would find it considerably more difficult to enforce the ratification of the fiscal treaty, due to pass through French parliament post-election.

The French election is likely to dent the Berlin-Paris relationship, regardless of the result. France’s shaky economy and volatile -at times populist- politics make it an unreliable partner in European policy-making. Other states, notably the UK, which shares Germany’s commitment to fiscal restraint and a balanced budget, should/could seek to use this opportunity to forge a new power relationship with Germany. It may well be the UK’s chance to assert itself on the European stage.

Marine le Pen is doing her best to distance herself from the racist and anti semitic past of the FN, and two of her main policies are dead right: leave the Euro and stop throwing money at the EU. Her other policy, of closed-shop protectionism, she shares with Hollande and Sarkosy.

We obviously believe that it is valid to discuss a eurozone exit or break-up (and have done/will continue to do so). That said, Le Pen’s pledge to leave the euro is not backed up by a clear policy or strategy for doing so or any viable plans for how to control the impact it would have on the French economy.

Furthermore, in the context of dealing with the French debt and deficit issues (as mentioned in the blog) exiting the eurozone would probably make issues worse for France. Financial markets are already unsure over the French economy and borrowing costs would probably rise outside of the eurozone, at least initially, making French debt less sustainable. France also needs to undertake large structural reforms of its labour market, public spending and tax systems – none of which would go away with a eurozone exit (and look unlikely to take place under Le Pen or any of the candidates for that matter). If Le Pen presented a clear and coherent plan for exiting the eurozone, motivated for the right reasons and tackling the right problems, then we would happily judge it as so – unfortunately that is far from the case right now.

Well, your analysis needs some additional comment. Jean-Luc Mélenchon is not an extremist, he is just a left-side candidate, as Hollande is more centre-left. The fact of questioning the Lisbon treaty and the part plays by the BCE is not at all an extremist position, as long as Melenchon remains in the euro zone, on this respect, I would say that the UK position, and even sometimes the Open Europe position to deal with the EU is more extremist than the Melenchon one. In addition the debt as such is not a real issue, the main point is to know why this huge amount of money was used for. It is also clear that our taxpayers money going to the ECB which then goes to the banking system at 1%, and is then lent by the banks to the States at rate between 4 to 16% is no more acceptable. So Melenchon proposes to ask the banks to lend to the state at 1% and then go to the ECB to be refunded... this already exists in the French legislation. Le Pen's vote is a real issue. But to be quite clear, both UMP (Sarkozy) and the PS (Hollande) found some advantage to have a national Front strong enough, they can request the voters to avoid dispersion and de facto eliminating other concurrent...which is basically non democratic. For example, even with 18% it is unlikely that Marine Le Pen party got deputies in the next assembly (may be one or two) due to the “democratic front” which makes PS voting for the UMP and UMP voting for the PS to block any Le Pen candidates to be appointed. It is also quite probable, that Le Pen will not give any advice for the second round, as obviously UMP will explode if Hollande wins, and they expect to receive some people leaving UMP tyo go to the National Front...

You obviously don't consider it extreme to beggar nations to bailout mainly German banks, not extreme the huge rise in suicide rates, not extreme that every so called fix for the EU has failed miserably, Greece for instance is now more in debt after 2 yrs of bailouts. The EU is a corrupt badly designed system that is in the process of destroying democracy,it has installed 2 ex Goldman Sachs bankers to run countries & a further one to run the ECB. Lagarde after the conveniant ridding of DSK is only interested in bailing out her friends the bankers, her forecasts are basically propaganda & always wrong, she is unelected like the bunch of previously failed small time politicians like Rompuy & Barossa, backed up by unelected jokers like Rehn, who arrogantly demand that people should be willing to let people die on trolleys in hospital corridors just so they can hold onto their power & pay their paymasters. These idiots are out of pure hubris are going to drag Europe into populism, their extreme behaviour will breed extremes in their victims. The financial problems, not even including the derivative mountains are unsolvable unless the ECB becomes another FED, even then the problem will just be put off for another day. I hope Deutsche bank with it's roughly 64/1 leverage & personal derivative mountain goes bang, because the Germans deserve to drown in their hypocrisy after what they have done to the Greek people & are prepared to do to others. The whole thing needs to go bang, it will be the only way to rid ourselves of these corrupt self-serving Eurocrats & politicos. I have always considered myself a moderate & used to support Europe, but seeing how they have treated their supposed own people, I now see it as a club for an elite & a bunch of hangers on who basically do not give a crap about the reality of AUSTERITY for people who were promised protection within this club. I personally feel angry & I know so do a lot of other people, the major parties give no alternative to TINA so if they turn to populism, so be it. People have been made to feel powerless with no voice, do not be surprised by the outcome of this, there are historical precedents which too were EXTREME. Openid not working regards SteviFinn.

The way this article was written seems to confirm that not only does Angela Merkel run the EU but that everyone should just accept this as an inevitable fact simply because Germany is the most powerful member.

Why does membership of the EU mean an unavoidable kowtowing to German policies and why shouldn't "lesser" countries seek to deviate from this domination and follow their own preferred way of life? Of course, the reason is clear - being a member of the EU means the voluntary adoption of a straitjacket and the renunciation of the true meaning of democracy

The problem all over Europe is that 90% of its politicians are simply populists. Populists that is, as promising things on major issues that are totally unrealistic for social, economic or legal reasons.

Take Hollande as you mention starting with a 3% growth is 'Alice in Wonderland' stuff. They will be lucky if they get half of it. With subsequently lower possibilities of other growth because the money from the assumed growth is not there to be pumped around or cannot constitute a basis to borrow upon.

2 Points:-markets know this and will react to it almost certainly and directly start to price it in. Which means that from the beginning his plan is absolutely unrealistic.-likely we will see all sorts of ad hoc emergency measures to tackle the 'disappointments' (likely again making a mess of things).

It looks like the European voter still like to believe that things can go back to as they always were.Seen from a strategic perspective there is hardly any strategy and what there is is based on totally unrealistic assumptions (and executed by largely uncompetent management). A recipe for disaster. Well for an outsider interesting stuff as long as you yourself are not involved.

Another point.It is difficult for me to see why existing parties like Sarkozy's donot implement part of the 'Populist' agenda in their own programm. Not only in France.

Of course he is doing it now, but the way it is done makes it totally uncredible (after FN got 20% of the vote and less than a month for the election 2nd round.People are stupid, but not that stupid.

The immigration issue for instance. The populists have clearly a point (there are clearly huge social and economic problems with bottom part of the labormarket mass immigration) but also a huge PR problem (they bring it in the 'kick the blacks/arabs out' way iso simply focussing on costs, social absorbtion-capacity. Which would make it also acceptable to people that are not real FN material. The FN for instance always will bring the 'racist' image with it. A lot of people simply find that unacceptable.

It looks there is a potential of something like 1/3 of the vote. Optimum for the populists (including disappointed voters for other parties and especially structural non-voters). And that is on the right wing side.On the left wing there is also a huge potential. And of courser the is a lot of movement between these 2 extremes.Of course the right populists have huge difficulties to use that potential (often dodgy leaders, no proper organisation, not able to provide remotely proper managers when in power, differences within its own ranks).

In Holland this has with the 2 waves of populism been properly researched and could be tested in practice as well. And facts in other countries (like France now) point as well into that direction.

The problem being that as nobody really want these parties (both right and left (in several countries Germany, Holland to name a few they are on the left as well in in substantial numbers) in a government. Which results into coalition governments often of a unrealistic kind and therefor totally undecisive.

The "vision for Europe" that Merkel, Sarkozy, the EU and others have "agreed" is evidently disputed by votes for, as you describe, "extremist" parties.This "vision" has been arranged largely over the heads of the people and includes unwelcome austerity measures directly linked to the common currency.The point here is to remember that in France 49% voted against Maastricht and the Euro in 1992 so there is no consensus for all of the subtending treaties, regulations etc., following.The weak showing for Sarkozy etc., demonstrates that the "vision for Europe" is a minority concern.

So Sarkozy will do what Cameron did - address the EU and 'uman rights concerns of his conservative voters, promising to delete these, when he gets back into power he will fail to deliver. It is called lying.